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Friday, March 29, 2024

Path

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As July ends, the dry heat of summer gives way to the almost daily patter of rain. Across the nation, people are either coming back from vacation or gearing up to go on one. It is the middle of the year, a time for taking stock and potentially adjusting paths.

On the national stage, pundits and analysts pick apart the presidential state of the nation address. In homes, fresh graduates begin to think about the new paths they will take. In corporate offices, companies review the progress of their plans and think about plans for the future. 

The central challenge of planning of course is that it is about making decisions based on assumptions about what the future will hold. If the actual reality is significantly different from what is anticipated, then the plan’s likelihood of success goes down pretty rapidly. 

In an increasingly volatile and uncertain world, developing a single unchanging plan which relies on one most likely forecast of the future has become unacceptable.

Dealing with uncertainty

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There are three general approaches to dealing with uncertainty: contingency planning, portfolio management and flexibility. Of course, there is also simply praying the future unfolds as we predict—but, as Sullivan and Harper’s book famously declared, hope is not a method.

Contingency planning essentially involves planning for a most likely future, but being prepared to revise the plan if the actual reality deviates enough from expectation. This approach is the one that almost all firms consider first. In industries or markets where the future can be predicted with fairly high accuracy, or even in the rare cases where the company itself wields substantial power over the industry situation, this makes sense.  In terms of cost, the company’s resources are concentrated on a single plan, with some resources aimed at developing the capability to mobilize a contingency plan.

Portfolio management involves covering multiple bases.  If a company is large enough, this is essentially shaping the company so that no single event affects more than a small portion of the company. Essentially, this is about diversification and exposure or concentration management. In operations, this means, for example, having multiple manufacturing nodes and multiple suppliers. In terms of customer, this means ensuring that no more than a small portion of total revenue comes from a single client or a single client group. This also includes policies ensuring that the key executives do not travel together in the same vehicle. Policies such as the “designated survivor” would be an extreme means of ensuring that a nation does not become utterly rudderless in case of a catastrophic incident. In terms of product maturity, this would involve ensuring that there is always a portfolio including mature, cash-generating lines to meet both investment return expectations as well as to fund younger product lines. Portfolio management can have a goal simply of building resilience—crafting a company that can bounce back from negative events, or building robustness – crafting a company that is designed not only to recover and rebuild from setbacks but one that can capture the opportunity in uncertainty. Portfolio management is not without cost. Obviously there are efficiencies gained from concentrating purchases from a single supplier or manufacturing in a central node. 

And finally, there is the company that invests in flexibility. Essentially, this is a company that has decided that its strategy is to remain fluid and to adapt to changing times. For these companies, the strategy is not so much about a clear product design as a general direction or identity and a set of competencies and resources to maintain—think, for example, of the quickly changing fashions of Zara and H&M. Another method of investing in flexibility is to keep multiple strategic options open. 

At the center of every planning decision is a decision about this balance: focus versus flexibility.  

The job of leadership

Whether it is Duterte or Trudeau, Trump or Nieto, Gates or Jobs, Grove or Page, every leader is eventually evaluated on the outcomes he achieves. This, of course, does not mean that method or style is unimportant. Both influence the eventual outcome. 

However, no amount of charisma should be allowed to mask a bleeding balance sheet and, in an ideal world, the employee who produces the best and the most widgets should get the highest compensation. The reality, of course, is that interpersonal style matters, and that networks and alignment often mean the difference between resounding success and unaccountable failure. Nowhere is this as true as it is in politics. In the world of government, decisions are not necessarily about what is ethical or effective. More often, they are about what is acceptable. Acceptability, in turn, is often a matter of allegiance and relationships, with many a quid pro quo watering down what start out as promising programs.  In democracies, to make matters worse, the formal position of power is often a matter of name recall—rarely a function of actual competence. 

But politics is not a monopoly of government. Any activity that requires more than two individuals immediately introduces the factor of interpersonal relationships, and hence politics. And this is where leadership and management is different from the work of the artist of the engineer. Management requires the accomplishment of goals through people. And while the formal tools of management such as pay and promotions have their place, the softer tools are often just as, and even more, important. 

End Game 

And, yes, certainly planning is about the how. But that is not the first question. In planning, whether for a career, a company or a nation, one thing makes planning easier – having a clear picture of the desired outcome. This explains why the first step in organization planning, whether corporate or government, is about setting goals. For individuals, this first step is often the one that is most difficult. What is your end game?

Readers can email Maya at integrations_manila@yahoo.com.  Or visit her site at http://integrations.tumblr.com.  For academic publications, Maya uses her full name, Maria Elena Baltazar Herrera.

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